Logos of the brands Tumblr and Yahoo are shown on the screen of tablets. Yahoo bought the popular blogging platform Tumblr for $1.1 billion. / FRED DUFOUR AFP/Getty Images

by Jon Swartz and Roger Yu, USA TODAY

by Jon Swartz and Roger Yu, USA TODAY

SAN FRANCISCO - Yahoo CEO Marissa Mayer says her company's $1.1 billion acquisition of Tumblr could be a game changer. But some question whether Yahoo is game for the hip upstart.

"This is incredibly important," Mayer said in a phone interview before a press conference in New York Monday. "Our (mergers and acquisition) was around acquiring talent. This is as much strategic, enhancing growth and getting amazing content."

Tumblr, an image-intensive blog platform popular among a younger audience, could be the crown jewel in Mayer's major reclamation project of Yahoo, which is competing with Google and Facebook for billions of dollars in advertising revenue.

At the press conference in New York, where Tumblr is based, Yahoo also unfurled a revamped version of photo-sharing site Flickr, featuring big, bolder photos and an Android app.

"It feels like people are rooting for Yahoo," Mayer said, pointing to the return of former employees, or "boomerangs" to the company and a bump in online audience figures. "There is more energy on campus than before. Something is happening at Yahoo, and we feel it."

But in scooping up an online service that skews to a younger, more mobile audience, Yahoo - whose demographic is older - faces several hurdles. Key among them is integrating a vastly different core of users, keeping them happy and monetizing them.

Mayer admitted as much in a blog post, where she promised "not to screw it up."

The pledge tacitly acknowledges the Internet giant's spotty acquisition record. And this one could be tricky, analysts and investors say.

Technology analyst Jonathan Yarmis says in the best of circumstances, acquisitions are hard and that Yahoo has never been in the best of circumstances, "whether it was a dysfunctional board trying to prove it's smarter than the last dysfunctional board, a viper's nest of competing fiefdoms, or a lack of a clear, consistent strategic vision," he said.

"Add all these up and it's no surprise they've had a poor track record," Yarmis said. "They've fixed at least some of these things but even still, this reeks of opportunity meets desperation."

Then there is Tumblr's adult content, which can include pornography. "Tumblr does not insist on knowing the real identities for users, and some of the Tumblr content is very adult-oriented, both features that advertisers would find repellant," says Brian Proffitt, an adjunct instructor of management in the University of Notre Dame's Mendoza College of Business.

That also raises the question of how Yahoo plans to sell ads for Tumblr, which has been averse to splashy ads but has started to sell its inventory of content. Yahoo will consider search ads on Tumblr and will talk to bloggers who are interested in selling ads for their blog pages, Mayer said.

"Yahoo has a very difficult balancing act ahead: It has to keep Tumblr's current active user base passionately engaged and spending time on the site, while also finding a way to add advertising and other revenue sources," says Zachary Reiss-Davis, an analyst at Forrester Research. "Mayer said ads will be 'very light' and 'really fit users' expectations' - but Yahoo has to make monetization work without turning off core (Tumblr) users."

TUMBLR'S UPSIDE

But the Tumblr deal, Yahoo estimates, will boost Yahoo's audience 50% to more than 1 billion monthly visitors (about 700 million for Yahoo and 300 million for Tumblr). Just as important, Yahoo is scrambling to regain the hip factor it once enjoyed and to show investors the deal can increase profits and revenue.

"It brings more users, especially of the young, hip demographic that Yahoo is missing," says IDC analyst Karsten Weide. "It brings more traffic, user engagement and ad dollars. And it is an injection of much needed cool."

The deal, expected to close before year-end, won't affect Yahoo's financials in 2013. But it will contribute "materially" to the Internet giant's revenue in 2014, the company said. Yahoo said it will pay "substantially all" cash for Tumblr, using proceeds from last year's sale of about half of its stake in Chinese Internet company Alibaba Holdings.

David Karp, the 26-year-old founder of Tumblr who will remain CEO, told USA TODAY that the acquisition plan laid out by Mayer "showed me a path, an opportunity, to do things we want to do but more quickly."

"There was no way we were getting to this place without (the plan by Yahoo to maintain Tumblr as an independent company)," Karp said.

For such an odd coupling to work, the strategy is simple, explained one fund manager.

"Try to take advantage of the synergy but also nurture (Tumblr's) independence," says Ryan Jacob, fund manager of Jacob Internet Fund. "Make sure they continue to grow the way they have and be the parent that can provide resources and operational resources that companies like Tumblr need."

"We will run this like eBay runs PayPal and Google handles YouTube," Mayer, a former Google executive who was named Yahoo CEO nearly a year ago, added in the phone interview.

Tumblr's traffic and "compelling content" drove Yahoo to approach Karp, Mayer said. The users of Tumblr, which claims 50 billion blog posts a month, are younger and more tech-savvy than most of Yahoo's users, making it attractive to advertisers.

Since joining Yahoo in July, Mayer has been scooping up start-ups, mainly to acquire engineering talent. But the Tumblr acquisition is the largest deal for Yahoo in a decade. Its other major deals include buying GeoCities in 1999 for more than $4 billion and a $1.63 billion deal to acquire search advertising firm Overture in 2003.

The deal most critics site as emblematic of Yahoo's acquisitions missteps is the purchase of Flickr in 2005, when it was one of the most popular sites for professional and amateur photographers. Yahoo steered resources to other divisions and failed to enhance Flickr's social and mobile features that were needed to compete with Facebook and Instagram. Flickr traffic plummeted.

Under Mayer, Flickr users have begun to notice improvements. Entrepreneur Sean Bonner, who launched #dearmarissamayer, a Twitter campaign to make Flickr "awesome again" told Wired magazine in April that Yahoo has responded to users' pleas.

"Flickr was awesome, we let it languish, and now we want it to be awesome again," Mayer said at the New York press conference.

Mayer seems to be making a preemptive strike against critics of past deals, who have charged that Yahoo has paid up for start-ups that over time added little to the company's revenue and which, in some cases, diluted the brand and the customer base of the acquired company.

Yahoo envisions incorporating Tumblr's unique posts and other interesting content to Yahoo's flowing newsfeed. "We think this increases the core Yahoo audience and, just as important, grows search," Mayer said in the interview.

Yahoo may integrate its search engine inside Tumblr, allowing Tumblr's content to appear on the results page on Tumblr and general web queries.

In targeting young consumers, top global brand companies - including all 10 of the largest movie studios - use Tumblr to promote their products, Mayer said in an earlier conference call Monday.

Tumblr is also ahead of Yahoo in chasing after customers who use smartphones to access sites, Mayer said. More than half of Tumblr's users are using the mobile app and conduct an average of seven sessions per day, Mayer said.

The Yahoo brand will not be visible on Tumblr for now and the "back-end" integration of some functions will be invisible to Tumblr users, Mayer said in Monday's conference call.